IDEAS home Printed from https://ideas.repec.org/a/eee/ecofin/v69y2024ipbs1062940823001377.html
   My bibliography  Save this article

Effect of sectoral holdings on the flow-performance sensitivity of mutual funds

Author

Listed:
  • Covachev, Svetoslav
  • Yadav, Vijay

Abstract

We find that the flow-performance sensitivity (FPS) of mutual funds depends on the composition of their sectoral holdings. We use the Morningstar classification of fund holdings into the following three Super Sectors: Defensive, Sensitive, and Cyclical. On average, the FPS decreases as the fraction of defensive or sensitive stocks increases in the fund’s portfolio. The FPS increases as the fraction of cyclical stocks increases. During high sentiment periods, the sensitivity of new sales as well as redemptions increases, resulting in overall higher FPS for all funds. However, in both the low and the high sentiment periods, the FPS is lower for funds with a higher fraction of defensive or sensitive stocks and higher for funds with a higher fraction of cyclical stocks. Investors with a long investment horizon may wish to avoid mutual funds that invest primarily in cyclical stocks as funds with high FPS tend to have high liquidity costs.

Suggested Citation

  • Covachev, Svetoslav & Yadav, Vijay, 2024. "Effect of sectoral holdings on the flow-performance sensitivity of mutual funds," The North American Journal of Economics and Finance, Elsevier, vol. 69(PB).
    • Handle: RePEc:eee:ecofin:v:69:y:2024:i:pb:s1062940823001377
    DOI: 10.1016/j.najef.2023.102014
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1062940823001377
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.najef.2023.102014?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Mutual funds; Performance; Flows; Sectors; Holdings;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecofin:v:69:y:2024:i:pb:s1062940823001377. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620163 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.